1/26/18

The new Nils Frahm album, 'All Melody'. was released today Friday and the whole thing is on repeat on the stereo as I type these words, what with him being a fave of this house. I already like it a lot after just two run-thrus (the track My Friend The Forest really works on first listen).

Anyway, here's a decent edit of the title track that I found on Youtube and gives a solid idea of the fayre.

1) I was not long this stock when writing this piece in IKN453 last weekend.

2) I am not long this stock now, either (in fact I've never owned it).

3) I'm not averse to a trade on it in the future because I found the case interesting enough to write up in the Weekly, but for the time being the temptation isn't too strong. This was not a reco for GQM either, more a potential trade idea for a certain type of subscriber that trawl for the unloved, out of fashion gold producer idea.

4) Above all, it's a treatise on balance sheets that was to show that not all bad ones are the same. In the case of other juniors that get an airing at this humble corner of cyberspace (RPM, P, etc) the company tries its very hardest to cover up the cruel reality of its financial position. But in GQM's case reality isn't as bad as appearances.

Here’s one
I’ve been looking at recently and, though not a trade or a buy yet, if news
comes out about a restructuring or re-capitalization of the company there may
be real value here. Golden Queen Mining Ltd (GQM.to) is the publically quoted
company that (slightly confusingly) owns 50% of “Golden Queen Mining LLC” (the
other 50% in private hands). Its main asset is the "Soledad Mountain Mine” in
California USA, an operating mine producing gold and silver.

With
111.15m shares out and a price of C$0.195,this weekend its market cap is around C$21.7m (U$17.3m) and as the mine
(on a 100% basis, 50% due to GQM.to) produces and sells around 12,000 oz of gold per
quarter, that immediately looks cheap.

“Too cheap dude, what’s the catch?”, I hear you ask and the answer is simple: One dog’s
dinner of a balance sheet.

GQM is in a
financial mess, with low levels of cash and financial debt, including large
chunks of debt to pay back this year. Those payments are set out at the top of
the latest set of financials, because they are a reason to cast doubt on GQM as
a going concern. Here’s the quote:

The Company is required to
pay the following to the Clay Group on the following dates: $5.4 million of
accrued interest and principal on January 1, 2018; $3.1 million of interest and
principal on April 1, 2018; $3.0 million of interest and principal on July 1,
2018; $3.0 million of interest and principal on and October 1, 2018. The
Company will need to receive cash distributions from GQM LLC to service its
debt and such distributions are contingent on GQM LLC’s ability to generate
positive cash flows. The Company reviewed the mine plan in light of the nine
months ended September 30, 2017 results and has determined it is unlikely it
will receive sufficient distributions from GQM LLC during this fiscal year to
service its debt in early 2018. This situation raises substantial doubt about
the Company’s ability to continue as a going concern. Consequently, discussions
with the Clay Group to restructure the reimbursement schedule have been initiated.
While the Company has been successful in re-negotiating the debt reimbursement
schedule with the Clay Group on previous occasions, there can be no assurance
that will be achieved going forward.

At first
sight that sounds pretty dire, but it’s also the point where the story gets
potentially interesting. The Clay Group is in fact the Clay family who have
been the major owners of this mine for many years (and hold director posts at
the company) The Clay family owns in effect over 50% of the Golden Queen mine,
via their approx 35.6% holding in GQM.to (50% owners of the mine) plus their
29.5% holding in Gauss LLC (owners of the other 50%). That’s the first thing,
to understand that The Clay Group isn’t about to pull the plug on GQM and its
mine, there’s a deal to be done here.

The second
thing is to take into account is what happened to this stock last year:

At the time
in October 2017 both my blog and Alphamining Blog (29) (30) covered the way in
which John Doody of Gold Stock Analyst unceremoniously dumped GQM from his
coverage and called sell to his subbers. As GQM had been a long-term position
in Doody’s universe (he’d been long the stock since at least 2009 and often
pumped it) and as GSA had a lot of subscribers (and it must be said, some of
them rather unsophisticated about the ways of the mining market), the sudden
dump into thin bids caused the stock price to break and it’s remained broken
ever since.

I wonder if Mr. Doody was on the Clay family’s Christmas card list this
year?

Anyway, cut
to today and we have a broken stock on top of a company that needs a
significant cash injection. That’s why in November last year GQM announced it was
running a rights offering (31), giving the chance to current shareholders to
buy 1.7 shares at a price of U$0.1325 per share (in other words, 22.5c for 1.7
shares). If fully taken up, this would mean 188m or so new shares added to the
GQM count and U$25m in its treasury.

However,
the reality is that this is the way the Clays have decided to inject capital
into GQM; if anyone else goes along with the plan then fine, but this was
designed for their 35% holding in the company. That will bring around C$10.5m
into treasury and allow GQM to pay off its debts to the Clays, in other words
the controlling family is getting more percentage control in return for
capitalizing the company. It would also mean GQM’s share count moving to around
178m, though we need to see the final score in the rights issue before
anything.

Therefore,
to round that lot into a couple of bullet points, we have:

A company with 50% of an
operating gold mine in California USA, that’s high cash cost (just about
producing free cash flow) but is clearly highly leveraged to the price of
gold at this level with a ton of financial debt on board.

A stock price that was broken
in two by a newsletter writer (and to put it as diplomatically as
possible I have very little time for John Doody, therefore anything he
sells is immediately interesting)

But long-standing family
backers who are the counterparty to that debt and are not walking away or
squeezing the company dry; au contraire, they’re putting in more of their
own cash to revive its fortunes.

Assuming
the final shares out count at GQM post-rights comes in at around 180m, its
pro-forma market cap would be around C$35m. That for a company with a far
healthier balance sheet, plus (hopefully) the cash treasury it needs to improve
operations and efficiency. This is a potentially (repeat, potentially,
underscore, potentially) interesting leverage play on gold, particularly
because its share price was blown to bits and its main owners now believe
they’re getting a real bargain. I’m going to be watching for both 4q17 and then
1q18 financials, as well as the final results of the rights offering because
once those documents are in, I can make a better informed decision.

1/25/18

See that "1" stuck next to the AISC estimate? See the explanation underneath? Wanna see it bigger?

1All-in sustaining costs are presented as
defined by the World Gold Council (“WGC”) less corporate general and
administrative expenses.

Seriously, these people make me laugh. In other words, "all in sustaining costs" is best defined as "anything we want it to be". Why not leave out the sustaining capital next time, guys? Or the worker salary item? Don't worry, nobody else will notice, they're all too busy reading the pump pieces that Fiore pays "independent" newsletter whores to vomit into the public realm.

TORONTO, Jan. 25, 2018 /CNW/ - Unifor is outraged at the murder of a third worker striking against Canadian owned Torex Gold Resources in Mexico.

"Workers are being murdered for opposing Torex Gold and nothing is being done about it," said National President Jerry Dias. "How many must die before corporations and corrupt Mexican unions are held accountable?"

...

According to the National Union of Mine,
Metal, Steel and Allied Workers of the Mexican Republic (Los Mineros),
last week labour activist Quintin Salgado
was on his way to meet strikers from Torex Gold's Media Luna mine when
he was intercepted and pulled from his vehicle. Salgado was beaten, his
cell phone was destroyed and he was threatened with further violence if
he kept advocating for a change of unions and a new contract. Yesterday
that threat was realized when Salgado was brutally murdered.

Full NR here. But of course TXG has nothing to do with it. Totally unrelated to the union in-fighting, even though the company sides with the CTM union because it struck the cozt deal with them that the workers at Torex are striking over. Nothing at all to do with the three deaths, right Fred? Now,tell us about your CSR expertise again...

On February 7th, you too can pay your money and attend the Mexico Mining Forum, on at the Sheraton in Mexico City. And your humble scribe is sorely tempted too, if only to sit in the front row and take notes on this panel at 2:45pm (IKN adds the red ink):

Maintaining a close
relationship with surrounding communities is one of the biggest
obstacles mining companies face. Otherwise, projects can risk blockades
or delays that can cost thousands of dollars a day and the public image
of a company. To minimize these types of risks, operators can rely on
international benchmarks and best practices.

Yes indeed, Fred Stanford of Torex Gold (TXG) is going to tell us all about good community relationships and how to maintain a calm and cordial local atmosphere in Mexico. You cannot make this shit up. Not only that, but I'm sure a few sharp eyes will also pick up the presence of Carrizal Mining on that list, an infamously poor corporate citizen in Mexico with a track record of local pollution incidents (along with unpaid fines) as long as your arm.

Right here. And sure enough, bad news travels slowly.The drill mapis the thing, where we see the pay dirt info and the two main points are:

Hole 10 gives the headline intersect, but it isn't much more than a twin from #9 that we already knew. The retail rah-rah will jump on the numbers because for sure the grade is good, but there's no size.

Importantly hole 13 is a duster, which constrains size (as expected, they wouldn't have been so tardy otherwise).

It's about time a fork got stuck into this breathless hype: This is not a "Nickel Moutain". It's a big mountain with small pockets of mineralization and the thing is, we knew that many years ago, the fact that GGI managed to drill through one more of these small areas does not make a mine. It makes a Canadian Venture Exchange pump if you publish a bunch of photos and hype up the rabble first by suggesting there are no end of metres of the stuff (and there aren't as we found out today), but that's all you have. Anyway, the rest of the NR is about the open nature and the whole pump is still resting on the "We think we can find the feeder" pablum of before. If this is worth C$280m market cap, I have film star good looks.

1/24/18

Top scamster Daniel Ameduri had Andy Hoffman on a utoob interview
yesterday that has racked up more than twice as may down votes as thumbs
up. I had a chance to post (and read) the comments section before 'ol
cigar Danny disabled the comments section. The comments were 100%
negative calling DA all kinds of not so nice names.

Hilarious, but sad that people actually listen to that POS.

- P

And after about 18 seconds of search, we find the event:

Here's the link to go check it out yourself if you want. And indeed, we also see that...

Comments are disabled for this video.

...which fits PJ's mail, so us Slow-Joe Luddites who don't use Youtube for hot crypto tips will never get to see the funstuff comments. Next time a few screenshots, guys?

Andy Hoffman has a nice smile, though. And a nice smile makes him trustworthy, right? Right?

Everything is playing to script and with this little pullback to a
higher low in the miners being resolved in the favored direction, the
writer bugs are going to further their bullish message and try to get
more reader bugs to follow their guidance. But absolutely nothing has
changed.

Grade reconciliation to the reserve model for the period August 1, 2017 to December 31, 2017 was approximately 75% to 80%.

And did you notice how PVG "forgot" to mention the average head grade in that NR? Well let IKN help because by using the grade, tonnage thoughput and gold production data given we can math it out: It's 8.40445 grams per tonne. And that's a big fat miss.

UPDATE, afternoon: 27% down and counting. Yep, loving right up the bottom.

1/22/18

You're going to have to be selective, as the sudden thawing in anti-mining attitude in the province of Chubut in Argentina willnot apply to those projects to the West near the Andean Cordillera. However, those in the C-Suite at Pan American Silver (PAAS) must be more optimistic about Navidad's chances than they've been in years. The following a segment from IKN453, out Sunday evening.

Much to my own surprise, there’s a
sudden thawing to the idea of mining in the Chubut province of Argentina
and if things go well for the national government’s argument, the principal
beneficiary will be the Navidad silver/zinc/lead project owned by Pan American
Silver (PAAS).

The reason for this potential
détente is new governor Mariano Arcioni, who in the last two weeks has made
noises (21) about being open to the idea of a “debate about mining” in the
province, as well as suggesting that the province’s legislature look into the
possibility of modifying the current law on mining in the region (specifically,
law 5,001 Article 2 to which we’ll get in a moment). And according to the very
interesting article I stuck up on the blog last week (22) this all started when
Arcioni went to Buenos Aires in his first trip as governor (after the death of
Mario das Neves) along with nearly all other provincial governors. At the lunch
they had, President Macri made a point of sitting next to Arcioni and,
according to that report, at one point whispered to him “I want Navidad”, a
clear reference to the PAAS project (and while we’re here, note that Ross Beaty
and Mauricio Macri are personal friends…helps).

This conversation has continued
since then between the two and now we have a governor who wants the matter to
go to a public debate and even a referendum. The problem with the Chubut law is that there is a clear majority against
mining and therefore changing the law for the whole province, but now Arcioni
is proposing a get-around using the idea of “Zonification”. In essence simple,
he proposes that each region inside Chubut
decide whether they want or do not want mining in their area. This is good news
for Navidad, because though the larger population centres to the Atlantic East
coast and the Andean Cordillera West are firmly against mining activity (e.g.
Yamana at Suyai still doesn’t stand a chance, neither do those silly uranium
project pumpers like UWE.v, see the Esquel political declarations about how
“mining would be unthinkable” in our area right here (23)) the central plateau
region wants (as a majority) the Navidad project to happen (jobs, activity,
growth etc). Therefore if (repeat IF) Chubut has some sort of vote and law
change to allow mining to happen in specific zones, PAAS will be very happy.

This is by no means a done deal
yet, for one thing the anti-mining groups in Chubut are already saying that
it’s not just the law that has to change but the provincial constitution (a
tougher one), but there’s certainly a crack in the door here.

A most interesting video right here from Peru's official government regional health directorate (Dirección Regional de Salud, normally known as DIRESA) regarding last week's spill at the Tahoe Resources (TAHO) (THO.to) Shahuindo mine in Cajamarca, Peru. Despite TAHO's best efforts to whitewash the story, the health authority is now telling locals around the mine and particularly those just below it to evacuate the area due to the health risk of chemicals in the mud from the mine. Also, in the video the regional director DIRESA tells locals that the mud is "probably contaminated" and that there's a strong smell coming from the mud that leads them to presume there are chemical substances in it. Meanwhile, if your Spanish leaves a little to be desired there's also a lot of footage of the flooded zone, crop fields covered in the run-off mud and affected local populations, etc.

It's also interesting to note that TAHO refused entry to the mine to local authorities and also the the National Water Agency (ANA) last week when they tried to get samples from the overflow.

Legendary legend, Brent Legend Cook, talks his book and bores the pants off everybody as usual. Likes zinc, starting to like lithium, Tinka gets a pump, Advantage gets a pump, Evrim too. We like the marijuana comment, too: "Personally....(pause)...I know it....(pause)...". As for gold, it'll do "reasonably well" according to the legendary legend.

Third Place: "Goldcorp (GG) goes Blockchain". Want proof that just using the word "blockchain" gets people's attention these days? Here it is. A semi-nothing post stuck together in three minutes, a boatload of hits.

Second Place: "Tahoe Resources (TAHO) (THO.to): A serious pollution incident in Peru".There was more info on this in the follow-up post here, plus there's more in today's Weekly, subbers. It beggars belief that TAHO thinks it can get away with this just by emitting a sophist's delight of a news release, their troubles have only just begun at Shahuindo.

First Place: "The word in Lima: PPK will resign in February". It got picked up on Facebook in Peru and received a semi-viral number of hits, which is neither here nor there but it's still the most visited post of the week and therefore at number one spot. I haven't answered any of the mails received from Peruvians on the subject either, if they want to know more they shouldn't ask me anyway. They should ask Teofilo Gamarra, the Fuji guy who's conducting the secret talks with Martin Vizcarra.

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